Davis Wright Tremaine Employee Benefits Teleconference March 12, 2009 Panel of Presenters: Jeff Belfiglio, Moderator Elizabeth Deckman, Moderator Jason Frogatt Stuart Harris Holly Klein (Wylam) Call-in Number: 888-505-4388 Passcode: 6294391
Structure and format of presentation Email questions to: HRSeminars@dwt.com Topics covered: Which employers affected? When? What if fail? Expanded COBRA election rights Premium assistance Notice obligations Final Q & A 2
Employers with group health plans subject to COBRA through Tax Code, ERISA or PHSA (Public Health Service Act): Private companies with 20 or more employees State and local government employers Federal government Other employers with group health plans subject to COBRA comparable coverage (such as state mini- COBRA ) 3
Health spending accounts (HSAs) Health flexible spending account (FSAs) under a Code Section 125 cafeteria plan Church group health plans may be excluded (i.e., free from ERISA, Tax Code or state mini-cobra laws) The Act focuses on group health plans Include dental-only and vision-only plans Includes health reimbursement arrangements (HRAs) and some employee assistance plans (EAPs) 4
The Act is effective February 17, 2009, but applicable for any period of coverage after that date If period of coverage = monthly, then March 1, 2009 Exceptions possible for shorter coverage periods Special effective dates for premium subsidy eligibility (September 1, 2008 through December 31, 2009) Extended COBRA election period also tied to date of notice 5
Legislative history suggests violation of new notice rules is a violation of COBRA notice rules ERISA attaches $110/day penalties for COBRA notice violations Tax Code $100/day excise tax for COBRA violations Potential lawsuits under ERISA and Public Health Service Act Other relief for COBRA notice failures? 6
The Act provides assistance eligible individuals (AEIs) another opportunity to elect COBRA Additional election right does not extend to COBRAcomparable coverage plans Election right begins February 17, 2009 and continues for 60 days following notification Election right available even if AEI did not previously elect, or prematurely ended COBRA 7
If elected, new COBRA coverage begins with first period of coverage on or after February 17, 2009 New coverage opportunity does not reach back to earlier periods New coverage does not extend period of COBRA coverage beyond what otherwise available 8
Special HIPAA rules on pre-existing conditions apply if AEI elects coverage during extended period Interim period disregarded for purposes of 63-day break in credible coverage rules under HIPAA 9
AEI pays only 35% of COBRA premium Employer or insurer picks up remaining 65% and is later reimbursed by the federal government AEI s 35% can be paid by third party, but employer payment alters benefit Premium subsidy continues for up to 9 months 10
102% of applicable premium still allowed AEI pays 35% of what plan charges Credit or repayment if AEI pays full premium Issues arise if employer helps out AEI Premium of $500, but employer pays $100 AEI pays 35% of $400/subsidy 65% of $400 11
Subsidy begins on first day of first month of the period of coverage beginning on or after February 17, 2009 Subsidy ends on the earliest of: 9 months after the first day of the first month of coverage The date following expiration of the maximum COBRA coverage period If the individual becomes eligible for coverage under other group health plan or Medicare (other than dental, vision, counseling, referral services, flexible spending arrangements under Tax Code 106(c)(2) or through an onsite medical clinic) 12
Qualified beneficiaries are eligible for COBRA assistance if: Eligible for federal or state COBRA at any time between September 1, 2008 and December 31, 2009; and Elects COBRA (when first offered or during extended election period); and Involuntarily terminated between September 1, 2008 and December 31, 2009 13
Income limits apply If taxpayer s income exceeds $145,000 ($290,000 for joint filers), then amount of the premium reduction must be repaid If taxpayer s income is between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium that must be repaid is reduced proportionately High-income individuals can waive assistance 14
Federal government subsidizes Usually employer subject to reimbursement, but in some cases insurer Treat employer/insurer payment as payment of payroll tax IRS Form 941 Offset payroll taxes owed Excess amounts treated as credits or refunds of payroll taxes 15
Documentation to secure reimbursement Attestation of involuntary termination of employment Report showing: Amount of payroll taxes offset Tax ID numbers of affected former employees Amount of subsidy reimbursed for each former employee and dependent 16
Plan sponsors must send additional premium assistance notifice New notice to anyone who became eligible to elect COBRA between September 1, 2008 and December 31, 2009: Notice of the availability of premium reduction Notice of extended election rights Notice of ability to enroll in different coverage (if employer permits) May satisfy notice requirements by amending existing election notices or including a supplement April 17, 2009 17
Notice must include forms necessary to establish eligibility Specific notice content requirements: Name, address, telephone number of plan administrator and any other relevant person Description of the extended election period Description of the obligation of AEI to notify plan of eligibility for subsequent coverage 18
Specific notice content requirements, continued: Description (displayed in a prominent manner) of AEI s right to a reduced premium Description (displayed in a prominent manner) of any conditions and entitlement to a reduced premium Description of the option of the AEI to enroll in different coverage (if employer permits) 19
Technical distinction between premium assistance notice and extended election notice Send to qualifying beneficiaries who would be eligible for premium subsidy, and who became entitled to COBRA before February 17, 2009, but have no coverage as of that date Plan administrator must provide notice within 60 days after February 17, 2009 (April 17, 2009) Notice must include right of extended election period, premium subsidy, and plan enrollment option (if applicable) 20
If permitted by employer, AEI may elect to enroll in different coverage Plan administrator has 60 days to give notice Eligible qualified beneficiary has 90 days after notice to elect 21
Different coverage must be coverage offered to active employees Different coverage may not have higher premium Different coverage cannot be restricted coverage (i.e., dental only, vision only, flexible spending arrangement, on-site medical facility, or wellness plan) 22
The Act directs DOL to provide model notices no later than 30 days after February 17, 2009 The DOL directed to provide outreach and education The DOL dedicated Web site for guidance related to COBRA premium assistance: http://www.dol.gov/ebsa/cobra.html 23
AEIs must notify plan (in writing) when no longer eligible for premium assistance DOL to specify time and manner of providing this notice Penalty for violating individuals 110% of premium reduction after termination of eligibility 24
Are you an affected employer? If so, determine eligible qualified beneficiaries Satisfy new notice requirements Establish administrative procedures for 65% premium subsidy Establish administrative procedures for federal reimbursement Additional guidance can be found at: www.dol.gov/ebsa/cobra.html 25